Budgeting, Planning & Forecasting

- 2 min read

12 Best Practices in Financial Planning and Analysis

Most CFOs are not happy with their Financial Planning and Analysis process, believing it delivers too little value and eats up too many resources. As a result, they often ask “What are Best Practices in Financial Planning & Analysis?” To date, the answers have been based on conventional wisdom, anecdotes, and popular trends propagated by finance magazines. What’s been lacking is hard data… until now.

The Institute of Management Accountants (IMA) and I developed a survey that more than 700 organizations around the globe participated in. What made this survey different was the approach it took. Previous research focused on a particular methodology, then worked backward to find success stories. The IMA survey instead focused on what the most successful organizations are doing differently from everyone else when it comes to FP&A. These successful organizations consistently meet or exceed their targets, and they consistently meet or beat their competition. Hard to think of a single CEO who wouldn’t crave those results (which, by the way, guarantee their bonus).

These most successful organizations tell us that their Financial Planning & Analysis process:

  • Drives Shareholder Value (or business value if privately held)
  • Drives execution of the strategy
  • Provides the mechanisms to ensure the financial and operational goals of the organization are achieved
  • Builds organizational awareness of the strategy and each department’s role in achieving it
  • Ensures the optimal allocation of resources
  • Ensures coordination of initiatives, projects, and programs

Again, what CFO, or CEO for that matter, wouldn’t want that? The question though is how these best-managed organizations were able to achieve these results. What’s in their drinking water?

Those are the questions the IMA survey set out to address, and the answers are illuminating. They are the subject of this series of blog posts called “12 Principles of Best Practice in Financial Planning and Analysis” which are:

If you haven’t got time to read the whole series right now, here’s my high-level summary of the findings:

The best-run companies use FP&A to drive business outcomes, not just predict them

There’s a lot to unpack there. The best-run companies have a clear understanding of how operational improvements will drive financial results, and they focus just as much attention (if not more) on operational planning as they do financial planning. In the best-run companies, people are held accountable for delivering specific operational and financial results. They know the resources they need to get those results, and after making their case, those resources are baked right into the budget and clearly identified. Is there more to it than that? Yes, a lot more, but like a compass, those fundamentals point to true north.

How do I undertake effective Financial Planning and Analysis?

So, what’s the first step to take in your journey to move toward best practice FP&A? Our suggestion is you first get a baseline by benchmarking your company or institution against the 700-plus organizations in the database. (Take the Global FP&A Survey here). You’ll be able to identify key gaps in your company’s practices, which of course is the first step to closing them. Then look at the IMA Management Accounting Competency Framework, paying particular attention to the sections on Planning & Reporting and Decision Making. Last, conduct an IT assessment to evaluate how well your systems are serving as a decision-making platform rather than just a patchwork of tools.

After reading this blog series, you may feel that your organization is far from best practice FP&A. You aren’t alone. The good news is that even small steps can make a big difference. Good luck on your personal journey to bring best practice FP&A to your organization. We’re here as a resource, so don’t hesitate to reach out!

You can also download our complete guide: A complete guide for Financial Planning and Analysis best practices   or follow our  FP&A best practices on-demand webinar

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